Magazine article American Banker

Civil Rights Groups Planning Suits to Spur Minority, Low-Income Loans

Magazine article American Banker

Civil Rights Groups Planning Suits to Spur Minority, Low-Income Loans

Article excerpt

WASHINGTON -- Bankers could face an explosion of litigation as a host of civil rights groups prepare to use the Fair Housing Act to force banks to lend to low-income and minority borrowers.

Two of the country's most active civil rights law firms -- the Washington Lawyers Committee for Civil Rights and Urban Affairs and the NAACP Legal Defense and Education Fund -- already have entered the fray.

Banking advocates said these groups, which employ dozens of lawyers and which can call in thousands more as volunteers, pose a serious threat to the industry.

The Justiec Department alone, can only really deal with a relative handful of fair-lending issues," said Warren Traiger, a New York banking attorney. "But, where as these are private actions, that really multiplies the number of potential litigants out there,"

Perhaps the biggest threat comes from the Lawyers Committee, the same group that recently convinced the Denny's restaurant chain to ante $54 million to settle discrimination charges.

"The Lawyers Committee has very capable lawyers and they pose a very significant litigation threat," said Andrew Sandler, a Washington, D.C., attorney who represented Chevy Chase and several other institutions in fair-lending cases.

Coordinating that litigation threat is John P. Relman, the director of the group's fair-housing project. Mr. Relman said he has begun a massive fair-lending probe targeting financial institutions in the Washington-Baltimore area.

"If litigation stems from this project, it may well be as massive as the Denny's case," Mr. Relman said.

The group should finish the initial phase of its work within a month, Mr. Relman said. At that point, the lawyers will review the data and decide which banks, if any, they should sue.

The group has recruited two of the Department of Justice's top fair-lending specialists for the investigation. Former prosecutor Richard Ritter, who left the department earlier this summer, will work with Bernard Sisken, a Philadelphia-based statistician who regularly reviews lending cases for the government.

"Our hope is to essentially develop the same type of investigation and litigation that Justice was doing, only this time in the private sector," Mr. Relman said.

The Legal Defense Fund is pursuing its own case in Alabama against the Gadsden Corp. and First National Bank of Gainesville, said Judith A. Browne, the organization's assistant counsel.

The Defense Fund is trying to show that the two institutions systematically rejected loan applications from African-Americans, she said. Mr. Browne said she anticipates filing similar suits during the coming months.

"I get a lot of calls with mortgage discrimination complaints," Ms. …

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